Suppose that for a particular firm the only variable input into the production process is labor and that output equals zero when no workers are hired. In addition, suppose that when the firm hires 2 workers, the total cost of production is $100 . When the firm hires 3 workers, the total cost of production is $120 . In addition, assume that the variable cost per unit of labor is the same

Johnny owns a house that would cost $100,000 to replace should it ever be destroyed by fire. There is a 0.1% chance that the house could be destroyed during the course of a year. Johnny's utility function is U = W0.5

How much would fair insurance cost that completely replaces the house if destroyed by fire? Assuming that Johnny has no other wealth, how much would Johnny be willing to pay for such an insurance policy? Why the difference?

Consider a market with just one firm. The demand in the market is p = 18 – Q and the firm has a linear cost function C(Q) = 2Q

a. How much output will this firm produce. What will be the profit and consumers surplus? b. Suppose a second firm with the same cost function enters the market and the two firms compete in a Cournot style (simultaneous output choice). What will be the equilibrium price and quantity in the market? What is the total market profit and CS?